Economic pressures

[Danny B]

going according to plan

"At its core, our fiat-based, reserve-currency, derivates-driven, interest rate-manipulated economy is a criminal enterprise that is explicitly designed to fail at offering human kind an equitable, just and common-sensical way to facilitate exchange. However, it is very well designed to transfer wealth from the middle class to the wealthiest of the world’s elite in crisis after financial crisis until the whole thing collapses. It is engineered to implode.

To most, it may appear to be failing, but in reality, the crash of the stock market and the instant vaporization of trillions of fiat dollars of wealth is a built-in feature of the greatest heist in human history. The economy is a Ponzi scheme; a well-known, very calculated method of extracting wealth from others. It can be done on a small scale, or it can be scaled up to rob entire nations, entire civilizations even, or, as we see developing right now, perhaps even an entire planet’s worth of wealth."
This IS plan "A" It's a Ponzi Scheme -The Real Reason Global Markets are Crashing : Waking Times

[Danny B]

Losing control of the markets

There are some very fast computers doing most of the trading in stocks. U.S. GOV is pumping up stocks through a group called "President's working Group on Markets". Better known as the "Plunge Protection Team" PPT
Apparently the Algos have trounced the PPT. GOV is all about confidence and can't allow stock crashes. Reportedly, the algos have out-gunned the GOV.
Algos OUTGUN the PPT! The Disastrous Day that Confidence Broke! | SilverDoctors.com
Edit: I need to expand on the info above. Stock investors use puts, stops, etc to avoid big losses. "may have been scarred with orders they thought protected their stops, only to find the rules allowed those “stops” to turn into market orders (i.e., what ever someone wants to pay) and were filled at levels they never dreamed of selling or buying at.

Some of these types of order fills have been reported to have transpired at cents on the dollar. (i.e., you wanted to sell at $1 to preserve your money and during the chaos – your order was filled and sold at .05 cents or vice versa)
So, the investors who thought that they were protected by "stop-losses" have discovered that they have NO protection.

Consider GOV as an enormous collection of bureaucrats. They are completely focused on the power and income of GOV. They have declared war on cash because it allows you to slip out of complete control. The IRS demands that you pay tax even on barter. As the economy winds down, they grab for every penny that they can find. http://www.zerohedge.com/news/2015-0...ent-hates-cash
Should we have a lockup of credit markets, all commerce will try to squeeze into cash. Won't that be a mess?
Stockman sums up the actions of the Chinese central bank, "These are acts of desperate, stupid madness, and here’s why." Here Comes The Red Cavalry——Goldman Says Back-Up The Trucks, Again! | David Stockman's Contra Corner
Headlines;
The Music Just Stopped In Saudi Arabia: Scramble To Slash Spending Begins As Oil Math Reveals Dire Picture | David Stockman's Contra Corner
BLACK MONDAY: The First Time EVER The Dow Has Dropped By More Than 500 Points On Two Consecutive Days
This article has a real shocker about China.
http://markstcyr.com/2015/08/25/cnbc...fork-its-done/

[wayne.ct]

The Trigger

I think we just witnessed the trigger event that defines the beginning of the transition, a.k.a. collapse, of the world as we have known it. By that I mean the market action of Monday and Tuesday. It will take a while to unfold, but it seems to me that this is a serious pull back in the financial markets. Instead of October's Black Monday (1987) we have August Black Monday (2015). It may turn out to be "Black Week" if the financial media happen to focus on the week's result.

I started out to post about the headline that asked is the market 80% overvalued. An 80 percent overvalue would correspond to an approximate 45% pull back. A 50 percent "adjustment" would correspond to a 100% overvaluation. A 1 percent pullback is approximately a 1 percent overvaluation, but the numbers are quixotic, when looking at overvaluation vs. collapse. The reason I questioned the 80 percent is the suggestion, in the next line of the post, that the market might collapse 80 to 90 percent. An 80 percent collapse would correspond to a 400% overvaluation. A 90 percent collapse would correspond to a 900 percent overvaluation.

Conclusion: Even the most pessimistic pundits will bend over backwards to put things in the best possible light. They all seem to me to be scared out of their wits. It makes me think of scenes from a movie I watched many years ago of flooding caused by a dam which broke. The dam is breaking.

On a positive note, Americans on the whole are smart, well educated and resilient. They will act in their own self-interest and survival instinct. And, there are many more of them than there are of power-drunk overlords, call them PTB or elites or the 1 percent.

[Danny B]

investing with free money

The market interventions are so pervasive that nobody can see clearly. According to the CAFR homepage, GOV owns a great deal of the stock market.
CAFR1 Home Page
On the above post, I showed the FED sending tons of pixels to the SNB to buy stocks. The FED was forbidden to buy stocks by it's charter for a very good reason. The FED buys everything with free wet-ink money. They don't need return. Normal investors need return. The FED has already proved that it will buy up every bit of junk out there. This prevents liquidation of mal-investment. Mal-investment drags down the system because it gives negative returns. When the FED removed all risk, it also removed all hazard and sanity. We saw in the dotcom crash that insane valuations can only go on for just so long. What happens when the FED buys up everything and squeezes out all the investors?

[Danny B]

China melting

China is important so, i write about China.
http://www.themalaysianinsider.com/s...armelo-ferlito
China Is Pushing On A String Ensemble - The Automatic Earth
China is juggling too many complex transformations - MarketWatch
One of the FED chairmen said that money printing (QE) does not work. China is doing lots of money printing. Possibly, the Chinese have an empty toolbox also.
Both China and Saudi are dumping U.S. Treasuries. Are they dumping because they need to raise cash or are they dumping to get rid of them?
http://www.zerohedge.com/news/2015-0...past-two-weeks
The contagion from a crash of China will have a very big effect here.

[Ruphus]

Some of these types of order fills have been reported to have transpired at cents on the dollar. (i.e., you wanted to sell at $1 to preserve your money and during the chaos – your order was filled and sold at .05 cents or vice versa)
So, the investors who thought that they were protected by "stop-losses" have discovered that they have NO protection.

OHHH so the quickest connections are not just for locking in the best buy prices. I didn't think about puts and stops and how they are also affected by speed.

[Danny B]

Efficiency will take out the banks.

The banking industry is by far the most lucrative industry. The "free money" business is great if you can get into it. BUT, every "great" opportunity attracts low-cost competition. Flawed Fundamentals, Nasty Macro, Structural Industry Change: For Wall Street Banks It Really Is Different This Time | Zero Hedge
Paypal, Google wallet, etc, etc are changing all this. Peer-to-peer lending is changing it. Crowd-sourcing is changing it. The Daily Bell - Approaching Asteroid Threatens Banks
A bank loan is inflationary on inception and deflationary on repayment. After all, the principle is created, NOT the interest. P2P lending moves existing savings and is not thin-air money. The banking industry is not going to survive the coming crash because it is not cyclical. It is a structural change.

[Danny B]

Prolonging a depression

All economies get occasional bouts of credit inflation that cause mal-investment. A crash occurs and the trash is swept away. All the crashes in America were short lived. This all ended when a socialist entered the White House. The pres did everything he could to keep inefficient businesses operating. A crash is a necessary mechanism to clear out bad businesses.
The process of industrialization and mechanization brings efficiency and price DEFLATION. Price deflation is anathema to the financial industry. It is anathema to collectivist GOV also. Both groups MUST have inflation to get Keynesian growth. Eventually, the credit bubble outruns the productivity and a crash ensues.
If the mal-investment is NOT washed away, the economy can not return to a healthy state. Great Depression I went on for 10 years because the mal-investment was rescued. Japan has 2 decades of doldrums resulting from rescuing mal-investment. GOV is sequentially rescuing banks who no longer have a viable business model. The banks would like to think that they are divorced from the productive loop of the economy. They are wrong.
The original purpose of the FED was to be the lender of last resort,,, to save banks from crashing in a bank run. With the creation of the FDIC, there is no use for the FED.
The FED is currently trying to rescue enormous mountains of mal-investment. The Daily Bell - Reliving the Crash of '29

[Danny B]

Default, the road to bond collapse

Saudi is selling U.S. Treasury bonds even though they have loads of cash. Seems they want to get rid of U.S. treasuries. Maybe they have been listening to Martin Armstrong say that those bonds will collapse in 2015.75
Russia is a seller of U.S. bonds also. China is selling hundreds of $ billions. China is doing BIG investment and infrastructure projects around the world and cashing out bonds to pay for them. Presumably, these bonds are presented to the primary dealer and cashed in. I really don't know.

Post WW II, Japan was rebuilt and put to work. They took their profits and bought U.S. Treasury bonds. They did vendor-financing and sent profits to GOV. Reportedly, they hold $ 1197 billion of these bonds. Jim Willie said that they are NOT allowed to cash them in under pain of death to the politicians. They are stuck with bonds that they can't sell. Decades ago, the money masters took our 401k plans and used them to build up China. The money was safely locked away from the retires. The Japanese plan was to be used on China. China holds $ 1271.2 billion in bonds.
http://www.treasury.gov/ticdata/Publish/mfh.txt

The Chinese have no intention of permanently financing a despicable GOV. They are dumping a LOT of bonds. Armstrong said that these bonds would collapse. The bonds have been over-printed and over-issued. Armstrong also said that confidence in public debt would crash. I suspect that a bond default is the approaching catalyst that will cause the bond collapse.

[Ruphus]

Bonds

If you have time can you talk about bonds more. I've read that China is transferring US treasury bonds to Germany to get "cash." The article also said that dumping these bond out on the "open market" pushes the price down, but would force yields up maybe by as much as 2-5%.

How does that work exactly?

What/who determines the yield of say a ten year bond? I am assuming that as more people try to sell the desire to have them go down, so they are devalued somehow, either as the price or the coupon yield rate. The GOV would need to combat that by increasing the yield of the coupon. But what is tied to this yield? What is the GOV selling with a bond?

[Danny B]

Reversal from GOV debt to private debt.

Headlines;
Worst decline in world trade in 6yrs – report
The Stock Market Hasn't Had a Selloff Like This One in Over 75 Years
Oil Industry Needs Half a Trillion Dollars to Endure Price Slump
And what happens if they can't endure?
Getting away from BS and propaganda, There is good analysis from Armstrong. He presents many outcomes as a process; if we reach this point, it will have this outcome,,,etc.
"Consequently, penetrating this week’s low will be INCREDIBLY significant for it would set the stage for an OUTSIDE REVERSAL TO THE UPSIDE in 2016 that would be just about the worst type of PANIC you could possibly create. WHY? Because this would imply a total meltdown in government and the rush of assets from government paper to private assets would be like a building on fire with all the doors locked, except one."
Armstrong writes about a loss of faith in GOV debt and a rush into private debt. I have to take issue with his conclusions because so much of private debt is dependent on consumption. Any big rush into private debt will create price inflation when consumption is already dropping. Just as we've seen a crash in commodities, i doubt that we will see a future rush into something that is so dependent on consumption.
"Even during periods of extreme hyperinflation, ALL assets rise in value. So there is no possible way for the world to meltdown while ONLY gold rises. "
He is blatantly wrong here. The price of necessities will always go up more than the price of luxuries. Gold isn't a commodity so, it has different rules. Compared to the 1930s, far more of our economy is centered on non-essentials. People won't take their last bit of savings and buy a dune buggy.

"That is just insane and the people who argue that money is not tangible are really thieves because it is fiat. They are clueless because ALL money is fiat if it has a fixed value — even gold. Money is purely an agreement for there is NOTHING that exists that is “money” in the context that they preach. Money is merely a medium of exchange that you are willing to accept simply because others will accept it from you. It does not matter if it is gold, paper, or bricks of tea."
He is wrong here too. He was a millionaire by age 15--16. He has no experience of being down to his last dime. Money in the transactional sphere is completely different than money in the store-of-value sphere. Rice is probably the most accepted thing in the transactional sphere. Gold is Numero uno in the store-of-value sphere. When you accept rice for your labor, you aren't worried if someone else will accept it from you in turn. You're HUNGRY.
He is correct about the burning building analogy. There will be one big golden door. There will be several smaller doors. The $ 100 trillion debt overhang is not going to flow into pork bellies. Even the small capital flight that we already see has crashed the prices of farmland. No, the building will burn down with most of the debt paper inside it.

"Therefore, the prospect of only gold rising is simply gibberish. If we penetrate this week’s low, then the type of Phase Transition that follows will be the worst type that we could ever imagine. This would set the stage for the complete meltdown in government. This will become our greatest concern for the pendulum will swing to the extreme left which will propel the swing to the extreme right. This becomes totally insane."

Once again, he's wrong. Bonds will be crashed to the basement. Stocks are suffering from huge inflationary pressures. $ Trillions more can't rush into stocks. Maybe Tesla and Amazon can survive without earnings but, the general market can't. GOV is trying to hold at bay the massive downward pressures affecting wages. Without high domestic wages, there is no chance of a return to a high-consumption economy.
Why This Week’s Low is So Important | Armstrong Economics

Food has the most universal demand. Gold has the highest rate of acceptance worldwide as a store of value. ALL other things are valued to be consumed or put to use,,, diamonds are an exception. We will slide down Exeter's pyramid regardless of what the debt bandits do. http://www.zerohedge.com/sites/defau...se-pyramid.jpg

[Danny B]

Smith and the Deep State

Nobody really believes that the politicians are the apex of power and control. Lindsey Williams has written a lot about the "elites" who control the oil and gas industry. Lindsey Williams
There are other groups and individuals that wield considerable power. As one would suspect these powerful people are not always in agreement on the best course of action. All species practice conservation of energy. All species grow to the limits of their resources. Socialism has great appeal to those who don't consider the long-term effects. Currently, we have socialism for both the rich and the poor.
oftwominds-Charles Hugh Smith: What If The "Crash" Is as Rigged as Everything Else?
Charles Hugh Smith writes about the people who hold the real power. He refers to them as the Deep State. Huge wealth disparity has always been a serious problem. Eventually, people give up on being productive because it gains them nothing. Smith thinks that the Deep State is ready to cut loose the banksters and fraudsters who have raped the system. The big crash is still ahead of us. Many millions are soon to die. Society as a whole will suffer greatly.
Quotes;
"As times grow more troubled, however, the unity of the ruling Elite fractures into irreconcilable political disunity, which becomes a proximate cause of the dissolution of the Empire if it continues.

I recently proposed the idea that Wall Street now poses a strategic threat to national security and thus to the Deep State itself: Who Gets Thrown Under the Bus in the Next Financial Crisis? (March 3, 2014)

Many consider it "impossible" that Wall Street could possibly lose its political grip on the nation's throat, but I suggest that Wall Street has over-reached, and is now teetering at the top of the S-Curve, i.e. it has reached Peak Wall Street. "
" Consider what the extremes of Wall Street/Federal Reserve predation, parasitism, avarice and power have done to the nation, and then ask if other factions within the Deep State are blind to the destructive consequences:

How The Fed Has Failed America, Part 2 (March 12, 2014)

The Fed Has Failed (and Will Continue to Fail), Part 1 (March 11, 2014)

Can anyone not in Wall Street or the Fed look at this chart and not see profound political disunity on the horizon? "
He uses the word "disunity". The more accurate term is revolution and destruction.
charles hugh smith-Is the Deep State Fracturing into Disunity?

The collectivists demand centralization to consolidate their control. Centralization is a bust. charles hugh smith-The Master Narrative Nobody Dares Admit: Centralization Has Failed

Smith also writes about education. " College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market. "
While it's great that he writes about the problems of HIGH tuition, there are other greater problems. "Robots will cut 25% of US jobs in 4 years, transform workforce – report " "Carl Frey and Michael Osborne. Their analysis predicted robots will displace jobs at an alarming rate, finding that 47 percent of total US jobs were “at risk” of being replaced by automation."
Robots will cut 25% of US jobs in 4 years, transform workforce – report — RT USA
There is no cure for efficiency. While the Deep State may not like socialism, I suspect that they would also be against 80% unemployment.

The Anglos have been at war for centuries. Burke said that "war is the health of the State. Anglo-Americans carry on this tradition of constant warfare. We love to kill and destroy,,, especially brown people. https://www.youtube.com/watch?v=dDw-zFFhFgc
Education is the best avenue for improving the world but, it doesn't make the profit that war does.
" In fact, if the whole world stopped spending money on the military for just 8 days, we could have the $39 billion still needed to provide 12 years of free, quality education to every child on the planet.”
http://www.wakingtimes.com/2015/08/2...ing-the-world/
"“The cost of training a student at the Latin American School of Medicine for six years including room and board is less than $5,000 U.S. dollars,” Fidel recited. “Cuban salaries are low, but the population doesn’t pay for education or health care.”
http://www.psmag.com/politics-and-la...h-fidel-castro

[Danny B]

Trying to see through smoke, mirros and mud.

Armstrong write that if stocks reach such-and-such a level, "this" will happen. The thing that I can't reconcile is; The markets are completely manipulated. How can the numbers be accurate? The Swiss (SNB) admitted that they had bought $billions worth of stock with free FED money.
"excessive liquidity supplied by the Federal Reserve have created a bubble so overblown that a mere six stocks, some of which have no earnings commensurate with their price, accounted for more than all of the gain in market capitalization in the S&P 500 prior to the current disruption. "
Where is Neo When We Need Him -- Paul Craig Roberts - PaulCraigRoberts.org
Years ago, it was reckoned that there was an extra $ 7 trillion in the markets.
There is no doubt about the free money. There is no doubt about the increase in market cap.
How does one accurately calculate any future event?

[wayne.ct]

Armstrong

I see some truth in Armstrong's article. In particular, it is impossible for ONLY gold to go up. In other words, it will NOT go up as priced in fiat without the prices of all other commodities going up in price at the same time. As before, I mean the price as quoted in fiat money. The real world does not operate in terms of dollars or Federal Reserve Notes. Money is simply a convenient way of doing business without physically trading actual commodities, one for another. The number of pounds of wheat flour you can purchase in exchange for one ounce of silver, for example, will change from day to day, but that ratio of exchange will be much more stable over a long period of time than will other such measures, etc. When the value of fiat collapses, it will be the fiat currency that loses its value in relation to all other things. Those things include basic business functions such as energy and farming. Those businesses will become more valuable as measured in fiat, but in relation to various commodities, they will more or less "hold their value".

Things that are more "sophisticated" such as stocks and bonds, are much more "tied" to fiat than to the real world. In the real world, a business manager has some discretion as to what bills are paid and what loans are serviced. This does not bode well for Wall Street and the banks. Profitable businesses will pay down their loans and unprofitable business will not be able to service their loans. THIS is what will cause the trouble in the lives of 80 to 90 percent of the people of whatever country.

This is why Exeter's pyramid needs to be modified. Parts of his pyramid are either inverted or will become inverted, in my opinion.

[Danny B]

Credit lockup

The over riding point to consider from Armstrong is; he said to have 1 month of cash on hand,,, preferably 3 months. You only need cash when you are cut off from credit. He said; "forget your mortgage,, just spend for gas and food."
8/28 Global equity funds witness biggest-ever exodus – CNBC
8/28 Fed up investors yank cash from almost everything just like 2008 – Bloomberg
If a bank is leveraged 30--1 and a depositor removes $1, the leverage goes much higher. Investors ARE fleeing both stocks and bonds. If the money markets and equity funds are hit by by too much redemption, they will go illiquid. The money markets are used to fund many other things. The FED has an emergency liquidity window. They will probably use it. IF credit locks up, nobody will make payments on loans. There is about a $ trillion a week of flow. How long can the system last if nobody can make a tax or loan payment? How much money will flow to brokerage accounts and NOT to banks?
If Armstrong is indeed forecasting a credit lockup, ALL leverage will go to zero. Contagion will take out everything but physical gold and dollar bills.